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please ans this in 10 minutes The balance sheet of Alok Cloth Mills at the end of year 0 (the present point of time) is
please ans this in 10 minutes
The balance sheet of Alok Cloth Mills at the end of year 0 (the present point of time) is as follows. Rs. in crore Liabilities Assets Shareholders' funds 500 Net fixed assets 550 200 Net working capital 200 Equity capital (20 crore shares of 300 Rs. 10 each) Reserves and surplus Loan funds( rate 10 percent) 250 750 750 The return on assets( NOPAT) is expected to be 18 percent of the asset value at the beginning of each year. The growth rate in assets and revenues will be 30 percent for the first three years, 18 percent for the next two years, and 10 percent thereafter. The effective tax rate of the firm is 34 percent, the pre-tax cost of debt is 10 percent and the cost of equity is 24 percent. The debt-equity ratio of the firm will be maintained at 1:2. Calculate the intrinsic value of the equity share of Alok Cloth Mills Ltd. (20 Marks)Step by Step Solution
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